Nicotine Fit

Trial lawyers thought they were due pay and congratulations for a tobacco settlement well done. The new A.G. and the Guv don't see it that way.

There’s nothing like a few billion dollars to bring out the worst in people. Just look at the fight over legal fees owed to the five lawyers who represented Texas in the tobacco lawsuit — a courthouse and public relations fight that involves the attorney general, his predecessor, and the Big Five trial lawyers the state hired to take on Big Tobacco.

You almost need a playbill to keep up with a tale that reads like a morality play involving at least three or four of the Seven Deadly Sins. In the tag-team role of Greed are the Big Five, who want to collect between $2.3 billion and $3.3 billion for two years of work representing the state in the tobacco case. Representing Pride — or Envy — is Republican Attorney General John Cornyn, who is waging a political war to make sure the tobacco lawyers get only a fraction of the billions they are after. Sloth is portrayed by former Democratic Attorney General Dan Morales, who allegedly backdated a contract in an effort to reward his lawyer pal, Marc Murr (see “Say It Ain’t So, Mo,”). And in a featured appearance in the minor role of Anger is Governor George W. Bush, who never paid much attention to the tobacco lawsuit until his political adversaries won it — and the big payoff that came with it.

The five trial lawyers — Walter Umphrey, Wayne Reaud, John O’Quinn, John Eddie Williams Jr., and Harold Nix — won the lawsuit. The state signed a contingency fee contract that promised the five lawyers a fixed percentage of the loot, if the state won. The lawyers took a case with poor prospects, risked between $40 million and $50 million of their own money, and won the largest settlement in the history of civil litigation — $17.3 billion — for the state of Texas. They should get paid for their efforts. That’s their strongest argument: a deal is a deal.

Three point three billion dollars split five ways is an enormous amount of money. And these attorneys are not a very sympathetic bunch. “They are not a pack of folks that you would ever give a shit about, quite frankly,” said one Austin lawyer. Perhaps. But they know how to fight in court, and they prevailed in a case that few ever believed they could win. Now they’re holding the state hostage to make sure they get paid. They have begun collecting the first installments on the $3.3 billion awarded by a national arbitration panel, all of which will be paid by the tobacco companies. However, they haven’t relinquished their claim to the 15 percent share of the state’s settlement. That would amount to $2.3 billion, and would come out of the state’s award from the tobacco companies. It was granted to the five trial lawyers by U.S. District Judge David Folsom, who is overseeing the tobacco case from the federal bench in Texarkana. However, the Big Five now have a deadline for their decision.

On November 5, Folsom ruled that the lawyers have to decide by November 19 whether they will accept the fees from the tobacco companies directly, or instead, continue to press their claim against the state for their 15 percent fee. Folsom also ruled that seven legislators, as well as Governor George W. Bush, are now official parties to the fee fight litigation, a move that allows Bush and others to stand shoulder to shoulder with Cornyn in their attack on the tort lawyers.

Cornyn’s job could be simple. He could laud his fellow lawyers for their work, remind Texans that no one had ever beaten the tobacco companies in court, and celebrate the state’s windfall. But Cornyn believes there is something fishy about the contract the Big Five made with Morales, when Morales was the attorney general representing the state’s interest. Cornyn and his deputies have uncovered evidence that Morales may have doctored a contract that could have netted his friend, Mark Murr, several hundred million dollars. So Cornyn now claims that the Big Five may have also been involved in something nefarious.

According to documents provided by the Attorney General’s office, Cornyn has been subpoenaed to testify before a grand jury believed to be investigating the matter. Additionally, in a letter regarding an open records request, Cornyn’s office says there are “two ongoing federal investigations into the hiring of outside counsel by the Morales Administration.” The letter goes on to say that the A.G.’s office has shared information with the F.B.I. and that both the F.B.I. and the U.S. Attorney have “verbally requested that we do not disclose any information relevant to this investigation, as release at this time would interfere with prosecution of their case. Prosecution is pending.” (That is, however, Cornyn’s office speaking, and not the U.S. Department of Justice.)

Cornyn Pushes Ahead

But while Cornyn uses the F.B.I. and the Department of Justice to keep the press at bay, he is not sitting in his office waiting for the feds and the grand jury to conclude their investigations. Cornyn is pressing his own investigation, albeit in a clumsy manner. On October 5, he filed a writ of mandamus with the federal Fifth Circuit Court of Appeals, in an effort to force Judge Folsom to rule on the motions before his court. While it’s unclear if Cornyn will succeed with his writ, he has undoubtedly irritated Folsom. In May, attorneys for the A.G.’s office and the Big Five met with Folsom and agreed there was nothing for Folsom to rule on, because both sides had reached a “standstill agreement” while they tried to mediate their dispute. By the time the two sides met again in Folsom’s court in August, Cornyn was impatient, requesting the judge to take action. His writ of mandamus before the Fifth Circuit suggests that he is not standing still.

Cornyn may have further insulted Folsom by attempting to seize control of the investigation of the Big Five, even though the federal judge has overseen all other aspects of this tobacco case. Cornyn wants to conduct his own investigation under the Texas Supreme Court: nine Republicans, all of whom won election with varying but substantial financial backing from the same interests which have been fighting trial lawyers for more than ten years.

While Folsom considers the Attorney General’s request to move the investigation to state court, Cornyn has made at least one other questionable move. In August, he sent out eighteen C.I.D.’s –civil investigative demands, the A.G.’s equivalent of a subpoena — to some of the lawyers who worked for Morales when he was attorney general, and to other lawyers who have either worked with the Big Five or were recruited to work on the tobacco case. The demands seek all kinds of information from the attorneys, including documents normally protected by attorney-client privilege.

Cornyn’s tactic could be considered harassment. He issued the demands under the authority of the state’s Deceptive Trade Practices Act, although the statute does not apply to professional service contracts such as those used by trial lawyers. Nor does the law apply to contracts valued at more than $100,000. As the trial lawyers are eager to point out, Cornyn’s biggest financial backers during his run for the A.G.’s office were the tort reformers, the corporate interests who for ten years have pooled their resources in elections and lobbying efforts aimed at making it much more difficult for trial lawyers (and individuals) to sue corporations. About $1 million — approximately 16 percent of the $6.5 million Cornyn spent on his campaign — came from Texans for Lawsuit Reform or from individuals who have contributed to the tort reform group. The tort reformers would like nothing better than to hurt the trial lawyers any way they can.

As it happens, the Big Five — like most trial lawyers — are big contributors to the Democrats. If Cornyn and Governor Bush can choke off some of the money the Big Five would give to Democrats, it should be easier for the GOP to maintain its stranglehold on statewide offices, while dealing with redistricting in the next legislative session. Indeed, some of Cornyn’s critics insist that the only reason the Attorney General is waging this battle is to stop the flow of money to the Democrats. For that reason, says one lawyer familiar with the case, “Cornyn will never settle this case. He’s going to fight the trial lawyers until somebody dies of old age.” But Folsom’s November 5 ruling may encourage Cornyn to think about his own mortality. By allowing Bush to become a litigant, Folsom opened the door for the Big Five to depose Governor Bush and ask him about the money he has raised from tobacco interests.

Then there’s Cornyn’s predecessor, Dan Morales, who allegedly backdated a contract that could have netted his friend Mark Murr more than $500 million — even though Murr’s duties in the tobacco case were never clear to anyone on the Big Five’s legal team. In addition to the ongoing federal investigation into his deal with Murr, a look at the record shows that Morales clearly misled the public. Right after the $17 billion settlement was announced, Morales told reporters there was no way the outside counsel would get $2 billion in legal fees. Yet at about the same time he was making that statement, Morales was signing a court document saying he wouldn’t fight the Big Five’s fee request.

Other states that filed similar suits are taking the tobacco money and moving on. But Cornyn, Bush, and a few legislators are fighting the lawyers hired by the state, even though by comparison the Texas lawyers got less — on a percentage basis — than attorneys working for the other major states. The Big Five aren’t exactly getting stiffed: Cornyn’s office estimates they’ve already collected $364 million from the fees awarded to them by the arbitration panel. But lawyers elsewhere are reaping more. In Mississippi, the trial lawyers got 35 percent of the state’s settlement, or about $1.4 billion; in Florida, the lawyers picked up $3.4 billion, 26 percent of the state’s take. Here in Texas — even if the lawyers get the maximum they’re demanding — they stand to take home about 19 percent of the state’s total award: $3.3 billion over two decades.

The Long and Winding Road

While Cornyn is using his office as a bully pulpit to attack the Big Five, the lawyers have responded by hiring Michael Tigar, a former University of Texas law professor and superstar litigator who has worked on a series of high-profile cases. While Tigar presses their case in court, Austin political consultant George Shipley is putting the Big Five’s spin on the press corps. With the multitude of players and spin doctors in this complex story, it is easy to lose sight of the fact that there is a fairly straightforward story line. It began with the state looking for lawyers to take a case, and those lawyers taking the case and winning.

In 1995, when then-Attorney General Morales approached Houston trial lawyer John O’Quinn, O’Quinn didn’t need any more lawsuits. And he wasn’t hurting for money. Yet when Morales called, O’Quinn couldn’t resist — probably because the case involved politics, intrigue, and of course, tons of money. A veteran of numerous high-profile and lucrative tort cases, O’Quinn is one of the most famous lawyers in Texas — and one of the most controversial. He’s fought with the State Bar and been sued several times by former business associates. Fortune magazine once called him “the lawyer from hell.”

It wasn’t that Morales liked O’Quinn; in fact, O’Quinn had contributed to one of Morales’ opponents. But O’Quinn and the other four lawyers had the deep pockets Morales needed to go after the tobacco companies. Morales simply didn’t have the budget and manpower to go after the companies by himself — a situation that provided Cornyn a disingenuous soundbite to use in his campaign to succeed Morales. Cornyn, who left his position on the Supreme Court to run for A.G., attacked Morales for hiring the Big Five. The A.G. had a $250 million budget and 3,800 employees; Cornyn complained: “Can’t Morales find a lawyer in his own office to represent the state in court without resorting to this offensive practice?”

The simple answer to Cornyn’s question was “No.” The Big Five spent between $40 million and $50 million litigating the case — about a fifth of the A.G.’s entire annual budget. There was no way Morales could have risked that much money on a case with such poor prospects. Indeed, the odds were terrible. From 1954 to 1996, between 800 and 1,000 personal injury lawsuits were filed against the tobacco companies. The plaintiffs lost every one, largely because the tobacco companies have such huge resources. In May 1998, American Lawyer reported that in 1996 Big Tobacco’s annual legal bill came to about $600 million. In 1997, it was estimated at $750 million. By the time this case settled in 1998, Big Tobacco had hired some twenty-three law firms in Texas alone.

Despite the intimidating odds, O’Quinn and the others agreed to work for the state. They liked Morales’ strategy. Other states were suing solely for reimbursement of Medicaid costs incurred while treating smokers. Morales and the Big Five did sue for those costs, but they also sued the tobacco companies under the Racketeering and Corrupt Organizations Act (RICO), which would allow the state to recover treble damages, while exposing the tobacco companies to criminal penalties.

In March 1996 Texas became the seventh state to sue the cigarette makers, as Morales and his lawyers filed suit in federal court in Texarkana. The Texas team asked for $4 billion.

Announcing the suit, Morales said the Big Five would get 15 percent of any award. Governor Bush and other Republicans ignored the matter. No one believed Morales and the five lawyers could win.

Over the next few months the Big Five went to work. They rented office space in Texarkana and began preparing for a trial they believed would last six months. Everything about the case was Texas-sized. There were 129 attorneys of record, working for tobacco companies and the state. They filed 1,856 docket entries. There were 50,000 exhibits, 1,500 witnesses, and some 23 million documents to be coded, filed, and computerized.

Initially, the tobacco companies made it clear they would fight the Texas case as long and hard as they could. At one point, they even asked for all of the medical records for every Medicaid patient in Texas, a request that could have taken years to fulfill. The Big Five fought the tobacco companies on every motion, every request. They held several mock trials, presenting their evidence to Texarkana residents to gauge their reactions to the various arguments the lawyers planned to present. They devised a strategy that would take full advantage of the RICO statute, which allowed them to use statistical models to prove damages and causation, something they could not have done in an ordinary personal-injury claim.

The state’s use of RICO changed the dynamics of the case and left the defendants reeling. The statute prevented the companies from presenting their usual defenses, which include the argument that individual plaintiffs had made the choice to smoke. It also allowed the state to subpoena all the top tobacco executives. By the end of 1997, faced with putting their chief executives on the stand in a protracted trial they were likely to lose, the tobacco companies came to the bargaining table.

The Settlement

On January 16, 1998, Dan Morales was on top of the world. He announced that the tobacco companies had agreed to pay the state between $14.5 billion and $15 billion. The value of the settlement has since been revised upward, to $17.3 billion. And that’s not all. Depending on who’s doing the math, the final value of the deal could be as much as $105 billion, because the payments continue for as long as the tobacco companies sell cigarettes. There’s even a cost-of-living adjustment in each annual payment, and the state will likely have lower health care costs because it will have fewer smokers to care for.

When Morales announced the deal, however, he was immediately confronted with questions about the fees for the Big Five. “I think any discussion or speculation of fees in the multibillion-dollar amount range is laughable,” Morales told reporters. “I think the court is going to do something appropriate, something responsible.” Trial lawyer Walter Umphrey saw things differently; he said he intended to ask Judge Folsom to “honor our contract.” Asked if that meant getting the full 15 percent, Umphrey assured everyone that was exactly what he meant. Six days later, Folsom signed an order obligating Texas to pay $2.3 billion of its recovery to the Big Five. Responding to the announcement of the settlement, Bush first congratulated Morales, then began complaining that the fees due the Big Five were “too big, way too big. A substantial part of that money ought to be going to the taxpayers.” A group of legislators headed by Republican Senator Troy Fraser (who has led the tort reform battle in the Legislature) agreed with Bush, and asked the court to intervene in the case to block payment of the fees to the lawyers. Cornyn joined them, saying that as A.G. he would not give any cases to lawyers whose “idea of public service is a fee that would make Midas blush.”

Throughout 1998, the two sides skirmished over the fees, and after months of wrangling, the Big Five agreed to submit their claims to a national arbitration panel. On December 11, the panel decided how much the lawyers from Florida, Mississippi, and Texas would get. The Big Five got $3.3 billion — all to be paid by the tobacco companies. Not a penny would come from the state. But there was a catch. The tobacco companies agreed to pay no more than $500 million per year nationwide to all of the lawyers who worked on the tobacco lawsuits. The $500 million per year will not be adjusted for inflation, and it must be shared with scores of lawyers from other states. So the Big Five will get their $3.3 billion, but the payments may be spread out over a period of ten to twenty-five years, making the award much less valuable than an immediate cash payment.

New A.G. on the Block

Once he was sworn in this year as Attorney General, John Cornyn officially joined the fight. On January 12, representatives from his office and those of the Big Five met to talk about the fee dispute, and how to facilitate whatever investigation into their actions Cornyn wanted to conduct. The meeting was scheduled to start at 3:30 p.m. but actually didn’t get underway until about 4 p.m. The time is important, because while the meeting was still in progress, Cornyn’s office distributed a press release claiming the Big Five “are not satisfied with their $3.3 billion attorneys’ fee award. They want a release from me, on behalf of the state, for any illegal or unethical conduct that they may have engaged in while representing the state.” The fax machine time stamp on the press release is 4:21 p.m.

The trial lawyers were livid. Charles Silver, a U.T. law professor serving as their (unpaid) ethics advisor, was at the January 12 meeting. After reading the press release, Silver wrote an op-ed piece that appeared in Texas Lawyer, blasting Cornyn. “An ethics investigation should not begin with a lie,” wrote Silver, “but here in Texas one just did.”

Yet facing a protracted investigation of their work, the Big Five still tried to strike a deal. They would relinquish their claim to the $2.3 billion award granted to them by Folsom if Cornyn agreed to conduct his investigation under the direction of the federal judge rather than the Texas Supreme Court. In return, the Big Five would only make a claim to the $3.3 billion awarded by the arbitration panel. Cornyn refused, because to agree would have eroded the basis for one of the legal arguments he was advancing. Cornyn claimed that by pursuing their claim to the $2.3 billion, the trial lawyers were essentially suing the state, which violates the Eleventh Amendment to the U.S. Constitution’s guarantee of sovereign immunity. That immunity, Cornyn argued, meant the fee dispute was a state matter and must be moved from federal court to the Texas Supreme Court. But in a major blow to the Attorney General, Cornyn’s legal argument was dismissed by Folsom in his November 5 ruling.

Cornyn and the private attorneys who represent the legislators, Pete Schenkkan and Mike McKetta, are also arguing that the Big Five — by asking for exorbitant fees — have breached their fiduciary duty to their client (the state), and should forfeit their fees. Cornyn and Schenkkan point to a recent Texas Supreme Court case — Burrow v. Arce — in which the court ruled that lawyers working on a contingency-fee case could be denied their fees if they breached their fiduciary duty to their clients. But the Burrow case was tried in state court. Cornyn is fighting the Big Five in federal court — which might explain why he submitted his October 5 writ of mandamus to the Fifth Circuit, asking it to order Folsom to either dismiss the Big Five’s $2.3 billion award or transfer the entire fee dispute to the Texas high court.

What’s Cornyn’s Angle?

The motivation of the Big Five is easily understood: money. Some argue that Cornyn’s motivation is more complex and is informed by political ideology. However, his critics believe Cornyn’s motivation is also money. They think Cornyn is simply trying to prevent the Big Five from getting their multi-billion dollar payday, which will enable the lawyers to make huge contributions to Democratic candidates. Now that the Republican Party has the advantage in Texas, Cornyn and other Republicans (including Bush’s chief political strategist, Karl Rove) want to keep that advantage. That will be easier to achieve if the trial lawyers don’t have discretionary income to contribute to the campaigns of Democratic candidates. Why else would Cornyn oppose payment of fees that — under the national arbitration award — are paid by the tobacco companies and not the state?

As for Rove, his background as a five-year consultant for tobacco giant Philip Morris raises a few questions. Perhaps the Republican political consultant is whispering in Cornyn’s ear, letting him know that now is the time to take the tort reform battle to the federal level. (Tort reform is part of Bush’s presidential campaign agenda.) Cornyn may also believe that the publicity generated by his fight with the trial lawyers will serve his interest in a future campaign — perhaps a race for governor — or else might serve as Cornyn’s audition for a role in the Bush White House. Perhaps Cornyn and Rove see it simply as payback time. The Big Five and other trial lawyers have hammered the tobacco companies in court, so Cornyn and Rove are content to watch the tobacco companies beat up on the trial lawyers in the court of public opinion. Cornyn, who has the power to stop the fight, must assume that he can’t lose, because even if the Big Five prevail, Cornyn can cash in the next time he runs for office and get tobacco companies to underwrite his campaign.

Notre Dame University law professor G. Robert Blakey, who was a member of the Big Five’s legal team, thinks Cornyn’s motivation is even simpler: Cornyn is protecting Big Business. Prior to his ascension to public office, Cornyn made his living defending big companies against plaintiffs’ lawyers. Cornyn even made an appearance before the Texas Supreme Court during the final weeks of the 1998 campaign, where he argued that asbestos manufacturer Pittsburgh-Corning has a right to keep out-of-state asbestosis plaintiffs from filing suit in Texas courts. Cornyn, Blakey says, is fighting the trial lawyers in an effort to protect the moneyed class. “This is a cultural war between people who want to hold people with money responsible for what they do,” he concluded, “and the people with money who want to be free of responsibility for what they do.”

Whatever is driving Cornyn, a source close to him says he has no choice but to continue fighting. That’s particularly true now that the F.B.I. is reportedly involved. If Cornyn settles the case now and the U.S. Attorney’s office returns indictments against Morales, Murr, or anyone else, then Cornyn would look like an idiot. The same source says Cornyn has yet to fully investigate charges made by Houston trial lawyer Joe Jamail, who allegedly has told investigators Morales asked him and other trial lawyers to each contribute $1 million to his legal defense fund.

Politics aside, there are troubling public policy aspects in the way Cornyn has handled the fee fight. Cornyn has refused to answer any questions about the investigation, responding with a four-paragraph statement that did not answer any of the twenty questions this reporter submitted in writing (see “Cornyn Responds,”). In response to a request made under the Texas Public Information Act, Cornyn’s office has even refused to estimate the number of hours spent on the matter. (Yet he has demanded to see time sheets for the Big Five, to determine how many hours they worked on the case.) There are additional questions about the legal basis of the C.I.D.s Cornyn issued to the trial lawyers. There is his sandbagging of the trial lawyers by attacking them in the press at the very moment he was meeting with them in negotiations. Cornyn has yet to fully explain his refusal to conduct his investigation under Judge Folsom. Nor will Cornyn — nor anyone working with him and the legislators opposing the payment of legal fees — say what they believe is owed to the lawyers who tried and won the case. A.G. spokesman Ted Delisi would say only, “We don’t want to disclose our legal strategy,” and Pete Schenkkan, who is working alongside Cornyn, said the trial lawyers “are due an appropriate fee, unless they breached their fiduciary duty.”

Amidst all this controversy is one indisputable fact: the tobacco settlement was a colossal win for the state of Texas. Without risking a dime of taxpayers’ money, the state won an outlandish sum that will enrich Texas for generations to come. The settlement also requires tobacco companies to stop billboard advertising, to fund anti-smoking campaigns, and to pay for hundreds of millions of dollars’ worth of medical research. The trial lawyers won the war, yet Cornyn and Bush, who had nothing to do with it, are fighting over the spoils. Cornyn has pledged to continue the fight, perhaps all the way to the U.S. Supreme Court, and the Big Five have 3.3 billion reasons to keep fighting.

While no clear winner has yet emerged in the fee fight, the tobacco companies have won several important battles. They are out of court, they have a guarantee that the states and their medical institutions won’t sue them again, and they have limited their payments to trial lawyers to $500 million per year — about two cents per pack of cigarettes sold. They even ended up with some unlikely allies in the $20 billion lawsuit the federal government filed against them in September: the states. Any amount the feds squeeze out of the tobacco companies will likely come from the money the companies are currently paying the states. So the states now have a financial interest in making sure the feds don’t get a dime out of Big Tobacco. “The tobacco companies made all the states that settled with them partners in the cigarette business,” said one lawyer working on the case. “This enterprise that was so evil, the one that’s killing our children, is now a partner of the states. Settling the lawsuits with the states is the smartest thing the tobacco companies ever did.”

Robert Bryce is a regular contributor to the Observer and a staff writer at the Austin Chronicle, where an earlier version of this article first appeared.

Cornyn Responds

The following is Attorney General John Cornyn’s response to a list of specific questions submitted by Robert Bryce.

The primary concern of the Office of the Attorney General is to protect the taxpayers of Texas from any potential liability. Currently, the five outside trial lawyers have broken their agreement to decide between the $3.3 billion from the tobacco companies and the $2.3 billion from taxpayers. It seems like an obvious choice to most Texans, but these lawyers admit to holding the taxpayer hostage for “leverage.” That is wrong.

These five trial lawyers should honor their December 1998 agreement with Governor Bush to let the taxpayers off the hook. In addition, these lawyers continue to refuse to cooperate with our investigation. They throw up roadblocks at every turn. I do not think it is proper to submit an investigation by the Attorney General’s Office to be supervised of a federal court. [sic]

Time and again these trial lawyers claim that they acted ethically. Now they have the chance to show the world that they did so. I call on them to help bring this issue to closure and honor their agreements to let taxpayers off the hook. I ask them to honorably comply and fully cooperate with our investigation and produce the documents which rightly belong to Texas.

If they choose not to cooperate and keep taxpayers on the hook, I will use every available legal means to protect the State of Texas.

Say It Ain’t So, Mo!

Though Attorney General John Cornyn is at a standstill in his fight with the five attorneys in the state’s tobacco case, he’s run up the score in his investigation of former A.G. Dan Morales and his friend Mark Murr.

During his first few weeks in office, Cornyn began looking at a deal Morales made with Houston lawyer Murr, which could have netted Murr $520 million in legal fees. According to lawyers close to the matter, when Morales first approached the state’s outside counsel in 1997 about cutting Murr into the deal, the lawyers refused. In fact, the sources say the five threatened to quit if Murr were allowed in. Despite their threats, Morales persevered; in January of 1997, he offered Murr a 3 percent cut of the award.

By all accounts, Murr did little or nothing in the way of legal work. “I never met the guy. I never heard anybody say his name. When he showed up afterward and had that contract, I thought ‘here we go again,'” recalls G. Robert Blakey, professor of law at the University of Notre Dame and expert on the RICO statute used in the civil suit against the tobacco companies. Blakey worked for the five lawyers Morales hired to represent the state.

Murr wasn’t bashful about pressing his claim. He initially asked for all $520 million that he believed his contract guaranteed him. In September of last year, however, a state arbitration panel reduced that amount to $260 million. Later, the national arbitration panel agreed to give Murr just $1 million. A few months later, Murr forswore any claim to the $1 million.

It didn’t take Cornyn long to follow the trail left by Morales and Murr. Within a few weeks of taking office, Cornyn got a copy of Murr’s contract; forensics experts hired by Cornyn concluded it had been doctored and backdated. Armed with that information, Cornyn went to court and accused Morales of “fraudulent manipulation of a court document.” For his part, Morales wanly called Cornyn a “liar.” But the damage was done.

The F.B.I. was soon questioning the various players. Morales and Murr — who have known each other since 1981, when they both began working at Bracewell & Patterson in Houston — were thrust into the spotlight. And lawyers who worked for Morales when he was A.G. were put on the defensive.

One lawyer said that during his years working with Morales, “there was nothing that had a hint of impropriety. I have a hard time reconciling what was going on with Murr. It made me sick at the time and still bothers me today.”

The Murr incident may have convinced Cornyn that there are other misdeeds to be uncovered. For one thing, Cornyn’s allies claim that Morales asked the trial lawyers who joined in the tobacco litigation to contribute at least $1 million each to a legal defense fund that Morales would control. The fund would have been used to defend Morales if the tobacco companies decided to file suit against him. Those allegations and others are reportedly being considered by a jury looking into Morales’ conduct. Travis County District Attorney Ronnie Earle, whose Public Integrity Unit is in charge of investigating any wrongdoing by public officials, refused to comment on the existence of a grand jury or any inquiries into Morales’ conduct.

All of which leads to a contradictory conclusion to Morales’ tenure as A.G.

Fellow politicos always described Morales as too uptight about ethical issues. And now, despite his role as the main engineer in a deal that could net the state billions of dollars, he could end up being indicted on criminal charges.